EU clears Apple and labels of colluding against free streaming music services, turns eye to App Stor

Posted:
in General Discussion edited August 2015
A European Commission inquiry found no evidence that Apple colluded with major record labels to impede free-to-stream services as part of the company's Apple Music business strategy, a report said Friday.




Sources familiar with the matter said the EU antitrust watchdog was looking for evidence that Apple colluded with labels to stifle competition from the likes of Spotify, but ultimately determined the dealings to be in the clear, reports Re/code. While it did not find evidence of illegal activity, the European Commission will continue to monitor the streaming industry.

Word of EU involvement first came in April when the Commission sent out questionnaires asking record labels and digital music companies to divulge details regarding potential streaming deals struck with Apple. The inquiry was initiated before Apple Music was officially announced in June.

Today's report notes the EU has since turned its attention to iOS App Store policies and is asking streaming music companies like Spotify about Apple's mandatory fees, restrictions and other potentially anti-competitive guidelines.

In July, the U.S. Federal Trade Commission began its own investigation into allegations that Apple is leveraging its iOS platform advantage and strict App Store policies to artificially stifle competition.

Apple takes a 30 percent cut of all App Store transactions, meaning rival streaming music services selling in-app subscriptions through their iOS apps have to either charge more or absorb the profit loss to stay competitive. This creates a problem for a relatively low margin industry in which companies charge a de facto $9.99 standard monthly rate based in large part on content royalties paid out to record labels.

The problem is compounded by rules restricting the advertisement of billing services outside the App Store, such as Web-based charges. A few companies have tried to thwart App Store regulations to varying success. Spotify, for example, sent out emails notifying iOS subscribers that a switch to Web-based billing would save them $3 per month. Subscribers who signed up to Spotify's paid tier through their iOS app pay a 30 percent premium to offset App Store fees.
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Comments

  • Reply 1 of 93
    toukaletoukale Posts: 37member

    Spotify have been lobbying hard, hoping a repeat of the ebook case.  The thing is, no amount of government involvement will be able to stop the growth Apple Music will gain at their expense.  Although spotify won't say which platform most of their paying users are on, it's easy for anyone to tell.  You simply have to compare the two main platforms when it comes to paid apps.  iOS holds a 70/30 split for paid apps vs android for paid apps.  With that in mind, one can more or less conclude most of spotify paying customers are for the most part, Apple customers.

     

    If that is the case, then spotify is in a much different position then I though just a few months ago. If we learned anything from the Apple maps fiasco is that, as bad as that launch was, it was bad.  Some 2+ years later, over 75% of iOS users are using Apple maps over the much better Google provided maps apps.  This is happening for one simple reason, "power of the default."  If this can happen to a much better product (Google maps), I can confidently say Apple will be able to convert a lot of spotify paying users on their platform.

     

    With competition like this from Apple and all the bad music label contracts, I don't see how spotify can ever hope to become profitable.  Unless of course a facebook or someone else with deep pocket come to the rescue.

  • Reply 2 of 93
    I predict that Apple will have to change the 30% cut on repeating subscriptions. The problem is these apps are free. Perhaps Apple changes the rule for subscription services to 30% of the first month. But that still doesn't work. Maybe 30% the first month and 10% for consecutive months. It can't be a one time fee because Apple IS incurring costs every month for these other services. It would be unfair to Apple to prevent them from collecting anything on an ongoing basis. Why should Apple absorb the costs of doing business for other companies?
  • Reply 3 of 93
    jungmarkjungmark Posts: 6,924member
    No collusion. I could have told them that.

    Buy ads, spotify. You're not getting a free ride from apple.
  • Reply 4 of 93
    nasseraenasserae Posts: 3,167member
    Quote:
    Originally Posted by starbird73 View Post



    I predict that Apple will have to change the 30% cut on repeating subscriptions. The problem is these apps are free. Perhaps Apple changes the rule for subscription services to 30% of the first month. But that still doesn't work. Maybe 30% the first month and 10% for consecutive months. It can't be a one time fee because Apple IS incurring costs every month for these other services. It would be unfair to Apple to prevent them from collecting anything on an ongoing basis. Why should Apple absorb the costs of doing business for other companies?

     

    Why would they do that?! There are no legal nor business reasons for Apple to change that rule.

  • Reply 5 of 93
    dreyfus2dreyfus2 Posts: 1,072member
    Quote:

    Originally Posted by starbird73 View Post



    I predict that Apple will have to change the 30% cut on repeating subscriptions. The problem is these apps are free. Perhaps Apple changes the rule for subscription services to 30% of the first month. But that still doesn't work...

     

    The commission can't really set prices (unless it is caps for utilities or things considered essential, such as EU-internal roaming fees), and they really shouldn't. Their only concern should be to establish if competition is affected here, and if that is the case, to make sure it won't be in the future.

     

    It is extremely hard to predict how this goes. iOS has far less marketshare in the EU than in the US, in classical prepaid-countries like Italy and Spain it is almost irrelevant. Nobody can talk about a monopoly here. Some competitors, like Amazon,  do not allow any competing third party content on their devices (try reading an ePub file or listening to Google music on a Kindle). From this angle, Apple is already among the most open - there is pretty much no service in existence that can't be used on iOS devices. Even the Apple TV allows third party content providers etc. I assume Apple is pretty safe from this point of view. Apple also allows free apps with subscription content paid elsewhere. This is totally free access for competitors, with Apple providing the infrastructure, the development tools, the testing platform, the storefront etc ad inf. Can't be a problem either.

     

    So, the only real question is: how much can you charge for access to a market place? And I predict hell will freeze over if the commission even gets into this. Payment providers, shopping mall operators, airport and seaport operators... all living off freely set fees and commissions for businesses using them, will be royally pissed. As a first result all businesses will demand the conditions of others to be transparent. That would become ugly in no time.

     

    (I too think 30% was OK when the App Store was new, and it is excessive now. But that is not a competition thing, it is a question of something that sells tons of high margin hardware generating an undue amount of additional income. Without developers this place would be dead, so keep the cut around an break-even level. Once there is no relevant profit, the commission will be empty-handed anyhow.)

  • Reply 6 of 93
    tallest skiltallest skil Posts: 43,388member

    The collapse of the EU can’t come quickly enough.

  • Reply 7 of 93
    The collapse of the EU can’t come quickly enough.

    You and Paul Krugman (sorry!) can keep hoping and waiting....
  • Reply 8 of 93
    plovellplovell Posts: 820member
    Quote:

    Originally Posted by NasserAE View Post

     
    Quote:
    Originally Posted by starbird73 View Post



    I predict that Apple will have to change the 30% cut on repeating subscriptions. The problem is these apps are free. Perhaps Apple changes the rule for subscription services to 30% of the first month. But that still doesn't work. Maybe 30% the first month and 10% for consecutive months. It can't be a one time fee because Apple IS incurring costs every month for these other services. It would be unfair to Apple to prevent them from collecting anything on an ongoing basis. Why should Apple absorb the costs of doing business for other companies?

     

    Why would they do that?! There are no legal nor business reasons for Apple to change that rule.




    If the European Commission says that there are are, then there are. We might or might not agree with that but our vote doesn't count.

  • Reply 9 of 93
    realisticrealistic Posts: 1,154member
    Quote:

    Originally Posted by dreyfus2 View Post

     

    ...

    (I too think 30% was OK when the App Store was new, and it is excessive now. But that is not a competition thing, it is a question of something that sells tons of high margin hardware generating an undue amount of additional income. Without developers this place would be dead, so keep the cut around an break-even level. Once there is no relevant profit, the commission will be empty-handed anyhow.)


    Totally disagree with your opinions expressed above. My opinion is that Apple earns every dime it gets and that without Apple's app store a lot of apps and developers wouldn't exist.

  • Reply 10 of 93
    plovellplovell Posts: 820member
    Quote:

    Originally Posted by dreyfus2 View Post

     
    Quote:
    Originally Posted by starbird73 View Post



    I predict that Apple will have to change the 30% cut on repeating subscriptions. The problem is these apps are free. Perhaps Apple changes the rule for subscription services to 30% of the first month. But that still doesn't work...

    ...

    (I too think 30% was OK when the App Store was new, and it is excessive now. But that is not a competition thing, it is a question of something that sells tons of high margin hardware generating an undue amount of additional income. Without developers this place would be dead, so keep the cut around an break-even level. Once there is no relevant profit, the commission will be empty-handed anyhow.)


    My take on this is that 30% is not unreasonable for apps but is not the right number for repeating subscriptions. 

     

    Some will say that Apple should have no cut (i.e. 0 %) but that's silly. After all, Apple does handle the billing and has to eat the cost of fraud there, so "free" is not right. My guess is that at 5% Apple would be making a loss and 10% would possibly (possibly!) break even. And let's face it - if Spotify has people sign up through their web page, what is their cost for providing that and doing their credit card billing, etc? I would be very surprised if it's lower than 10%. Very surprised.

  • Reply 11 of 93
    slurpyslurpy Posts: 5,362member
    The collapse of the EU can’t come quickly enough.

    It's beyond weird that you're always obsessesivy hoping and fantasizing for every system to collapse, and seem to find joy in the idea.
  • Reply 12 of 93
    plovellplovell Posts: 820member
    Quote:

    Originally Posted by Realistic View Post

     
    Totally disagree with your opinions expressed above. My opinion is that Apple earns every dime it gets and that without Apple's app store a lot of apps and developers wouldn't exist.


     

    I disagree with you with respect to repeating subscription stuff. For apps etc you're right - Apple does indeed deserve that revenue. But for subscription content such as magazines, newspapers, music and videos, I believe that the situation is different.

     

    Apple has already changed the rates for some things (I forget which) to 15% - for exactly this reason. And it's possible to buy the subscription externally (website or whatever) so Apple is not imposing apple-store-only lock-in (it's good that it's not). 

  • Reply 13 of 93
    nasseraenasserae Posts: 3,167member
    plovell wrote: »
    I disagree with you with respect to repeating subscription stuff. For apps etc you're right - Apple does indeed deserve that revenue. But for subscription content such as magazines, newspapers, music and videos, I believe that the situation is different.

    Apple has already changed the rates for some things (I forget which) to 15% - for exactly this reason. And it's possible to buy the subscription externally (website or whatever) so Apple is not imposing apple-store-only lock-in (it's good that it's not). 

    If Apple change their rates for subscription, and that's a big IF, I will be the first developer to switch my paid app to free with subscription to maximize my profit. How many other developers you think will do that as well?

    I never heard of that 15% you are talking about. What is your reference?
  • Reply 14 of 93
    plovellplovell Posts: 820member
    Quote:

    Originally Posted by Tallest Skil View Post

     

    The collapse of the EU can’t come quickly enough.




    I guess it can't, and it won't. And I hope that it doesn't come at all.

     

    I believe that it will certainly change and hopefully for the better because the previous century was a bad one for Europe ( and others, of course).

     

    I did not study American history at school and that is a blessing in some ways because it means that I can now look at the history of the revolutionary times without a preconceived mindset. It has been fascinating to read "The Quartet" by Joseph Ellis and see how the colonies, newly become States, dealt with one another in ways similar to that of the EU. And how Washington, Hamilton, Jay and Madison, with several helpers, managed to recognize the problems with the Articles of Confederation, organize the calling of the Constitutional Convention, and then draft and help ratification of the new Constitution, and Bill of Rights.

     

    I urge you to read this for then you'll recognize that most of the EU countries are now where the ex-colonies were in 1783. I don't know who their "Quartet" will be but I do hope that they have one. 

  • Reply 15 of 93
    plovellplovell Posts: 820member
    Quote:

    Originally Posted by NasserAE View Post

     
    Quote:

    Originally Posted by plovell View Post



    I disagree with you with respect to repeating subscription stuff. For apps etc you're right - Apple does indeed deserve that revenue. But for subscription content such as magazines, newspapers, music and videos, I believe that the situation is different.



    Apple has already changed the rates for some things (I forget which) to 15% - for exactly this reason. And it's possible to buy the subscription externally (website or whatever) so Apple is not imposing apple-store-only lock-in (it's good that it's not). 




    If Apple change their rates for subscription, and that's a big IF, I will be the first developer to switch my paid app to free with subscription to maximize my profit. How many other developers you think will do that as well?



    I never heard of that 15% you are talking about. What is your reference?



    I'm not sure if it will work for your app as this seems to be directed towards cost of content.

     

    Here's the reference I found

    http://www.macrumors.com/2015/04/13/apple-15-percent-cut-apple-tv-apps/

     

    If this is OK for Apple TV content then why not for streaming music ?

  • Reply 16 of 93
    nasseraenasserae Posts: 3,167member
    plovell wrote: »

    I'm not sure if it will work for your app as this seems to be directed towards cost of content.

    You see.. Now you are placing arbitrary conditions on that reduced subscription cut Apple takes. Why would Spotify gets the reduced subscription rate and my app wouldn't? What if my subscription model is needed to maintain up to date compliance with specific external references. Why should it be applicable to content and not other types?

    It's a slippery slope and this is why the 30% cut will not change.
    Here's the reference I found
    http://www.macrumors.com/2015/04/13/apple-15-percent-cut-apple-tv-apps/

    If this is OK for Apple TV content then why not for streaming music ?

    Because there is no App Store for TV. These are agreements Apple made with individual content providers.
  • Reply 17 of 93
    plovellplovell Posts: 820member
    Quote:

    Originally Posted by NasserAE View Post

     
    Quote:

    Originally Posted by plovell View Post





    I'm not sure if it will work for your app as this seems to be directed towards cost of content.




    You see.. Now you are placing arbitrary conditions on that reduced subscription cut Apple takes. Why would Spotify gets the reduced subscription rate and my app wouldn't? What if my subscription model is needed to maintain up to date compliance with specific external references. Why should it be applicable to content and not other types?



    It's a slippery slope and this is why the 30% cut will not change.
    Quote:

    Here's the reference I found

    http://www.macrumors.com/2015/04/13/apple-15-percent-cut-apple-tv-apps/



    If this is OK for Apple TV content then why not for streaming music ?




    Because there is no App Store for TV. These are agreements Apple made with individual content providers.

    These are questions that I cannot answer for you. And whatever restrictions there are not mine, but Apple's. You must discuss those issues and your own app/content/licensing model with your developer support folks.

     

    With regard to your question about Spotify, I can see how they would argue that the same rate should apply to their content (licensed from third parties, etc) as is the case for the Apple TV streaming content. I don't know whether or not they'll be successful but I do believe that they have a good case to be treated the same. YMMV.

  • Reply 18 of 93
    irnchrizirnchriz Posts: 1,609member
    So what if Apple charge third parties 30% Apple don't have a smartphone market share majority, they can charge whatever they like and if the third parties don't want to pay they can go elsewhere. No reason for the EU to be sticking its nose in.
  • Reply 19 of 93
    foggyhillfoggyhill Posts: 4,767member
    Quote:

    Originally Posted by plovell View Post

     

    My take on this is that 30% is not unreasonable for apps but is not the right number for repeating subscriptions. 

     

    Some will say that Apple should have no cut (i.e. 0 %) but that's silly. After all, Apple does handle the billing and has to eat the cost of fraud there, so "free" is not right. My guess is that at 5% Apple would be making a loss and 10% would possibly (possibly!) break even. And let's face it - if Spotify has people sign up through their web page, what is their cost for providing that and doing their credit card billing, etc? I would be very surprised if it's lower than 10%. Very surprised.


     

    Apple also provides exposure to a upscale market THEY CREATED;, that's also why people pay the 30%. Same reason why Stores take a cut... Its not just about providing billing. Don't get why people think that should be free!

  • Reply 20 of 93
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